The Personal Consumption Expenditures (PCE) Price Index came out this morning showing overall inflation at 3.4% year-over-year and core inflation, which excludes the volatile food and energy components, at 3.0%. Both readings for August were unchanged from downwardly revised readings in July.
So, what happened? Was inflation actually lower in July?
In one word – No.
These revisions were the result of methodology changes, not actually changes in price. The changes to the PCE methodology occurred as part of the 2026 Annual Updates to Statistics, with revisions going back to January 2021. These changes included adjustments to some calculations and sources behind the portfolio management and investment advice services, legal services, and compute software and accessories components of the Index.
Ultimately, both the overall and core PCE Price Index readings remain well above the Fed’s 2% target for inflation, and consumer inflation expectations are moving higher…
Bottom line, the inflation battle continues.